HSBC Global Asset Management has held the final close of its first dedicated HSBC Diversified Loan Fund, which combines both loan investing and direct lending within a fully managed, alternative credit solution.
With close to USD800 million raised since its launch, the fund has proved popular with investors looking for a diversified, core loan solutions.
The fund will primarily invest in floating rate, senior secured credit instruments such as syndicated loans, as well as senior secured and unitranche loans to middle market companies. The combination of loan investing and direct lending increases the opportunity set for the fund and enhances diversification – HSBC Global Asset Management anticipate circa 300-400 underlying positions within the fund once it is fully invested. These investments can be made in North America, Europe and Asia.
William Benjamin, Head of Alternative Investment Funds, HSBC Global Asset Management Limited, says: “The Fund has performed well in the short period since our first close. The first few months of 2018 saw increased market volatility and difficult performance for both equities and fixed rate asset classes, despite this, we’ve seen some strong and resilient performance demonstrated by our Syndicated Loan managers. We have also seen the first deployment from our Direct Lending managers, with both of them showing healthy investment pipelines.”
Syndicated and direct loans can offer a yield premium to high yield bond markets for what can be an equivalent level of credit risk. Such loans are often floating rate and senior secured. The floating rate nature of these investments may provide a degree of protection against rising interest rates. In addition, a focus on senior secured loans offers greater security in the event of default, compared with high yield bonds, as well as the potential for much higher recovery rates.